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IN THE HIGH COURT OF SOUTH AFRICA

EASTERN CAPE DIVISION, GRAHAMSTOWN

CA : 39 / 2010

Date Heard:18/10/2010

Date Delivered:27/10/10

In the matter between:

MOEGEMAT FAAIQ ANDREWS …....................................APPELLANT

Versus

NEDBANK LIMITED …................................................RESPONDENT

JUDGMENT

SMITH J:

[1] This is an appeal, with leave of the court a quo, against the judgment of Jansen J, in terms of which summary judgment was granted against the appellant, inter alia, for payment of the sum of R753 011.39; an order declaring the mortgaged immovable property executable and costs of suit on the attorney and client scale.

[2] The appellant opposed the application for summary judgment on the basis that the respondent had failed to comply with sections 129 and 130 of the National Credit Act, no 34 of 2005 (hereinafter referred as to the “Act”). The appellant had in particular averred that the section 129 letter should have been served by way of registered mail instead of by ordinary post. The appellant also applied for relief in terms of section 85 of the Act due to the fact that he was over-indebted.

[3] The appellant relies in this appeal mainly on two grounds namely:

3.1 That the court a quo erred in concluding that the respondent had complied with the provisions of sections 129 and 130 of the Act. In this regard it is contended on behalf of the appellant that the notice, having been delivered to the appellant by way of ordinary post instead of by registered post, did not comply with the provisions of the aforesaid sections. In addition it is contended that the contents of the aforesaid notice did not come to the attention of the appellant and that the purpose and spirit of the act have therefore not been effectively complied with; and

2. That the court erred in finding that the appellant had placed insufficient facts before it to enable the court to exercise its discretion in terms of section 85, read with sections 86 and 87 of the Act.

The other grounds of appeal relate to reliance by the court on decisions which, as was contended on behalf of the appellant, should have been distinguished from the facts in this matter.

The Facts

[4] On 1 April 2009 the respondent caused summons to be issued out of the Port Elizabeth High Court wherein it claimed from the appellant payment of the sum of R 753 011. 39, being the balance of the principal debt together with finance charges thereon, in respect of monies lent and advanced by respondent to the appellant in terms of a written agreement and incorporated into a mortgage bond which the respondent had registered on the appellant’s immovable property, being Erf 2968, Gelvandale, Nelson Mandela Bay Municipality.

[5] Amongst others, the respondent also prayed for an order declaring the foresaid property specifically executable and for costs of suit on an attorney and client scale. The respondent averred in its summons that it had complied with the provisions of sections 129 and 130 of the Act and that the period referred to in section 130 (1)(a) had elapsed without the appellant responding to the notice or surrendering the mortgaged property to it.

[6] The appellant entered appearance to defend and the respondent subsequently applied for summary judgment.

[7] The appellant in his opposing affidavit to the summary judgment application detailed the circumstances which caused him to be in arrears with his payments to the respondent. He stated in particular that when he purchased the foresaid property he was employed at MAD Superstores and was earning well. He had subsequently commenced studies to become an accountant and consequently resigned at MAD superstores to take up articles at BDO Spencer, a firm of accountants. He was subsequently employed by the Nelson Mandela Metropolitan Municipality on the basis of a six months contract with effect from 1 June 2009. He now earned considerably less than what he earned at MAD superstores and relied on assistance from his father to help with the bond repayments while he was busy with his articles. Unfortunately his father’s business also failed and he was unable to meet his bond repayments.

[8] He stated that the section 129 notice was received by his father during March 2009. He was unaware of the letter as his father had assumed that because the appellant was still negotiating with the bank it was not necessary to tell him about the letter which he simply filed away. It was only after he had consulted with a debt counsellor from the firm DRS Debt Restructuring Services and was asked whether he had received a letter in terms of section 129 that his father informed him that the letter had arrived during March by way of ordinary post. At that stage the summons had already been served on him. He therefore requested that the summary judgment proceedings be postponed to October 2009.

[9] The appellant subsequently also filed a supplementary affidavit wherein he alleged severe prejudice if summary judgment was granted. He sought relief in terms of section 85 of the Act and requested the court to exercise its discretion in terms of that section and to make an order as contemplated in section 87 of the Act to relieve him of his over-indebtedness. In the alternative he asked that the matter be referred to a debt counsellor to make recommendations as contemplated in terms of section 86(7) of the Act.

Compliance with sections 129 and 130 of the Act

[10] Both counsel for the appellant and the respondent have, in their heads of argument, referred to several conflicting judgments regarding the issue of what constitutes proper delivery of the notice required in terms section 129. The Supreme Court of Appeal has, however, since authoritatively pronounced on this issue in the matter of Benjamin Rossouw and another v First Rand Bank Limited t/a FNB Home loans (formerly First Rand Bank of South Africa (unreported case number 640/2009 and delivered on 30 September 2010).

[11] The legal principles enunciated by Maya JA, and which are of application in this matter, can be summarized as follows:

11.1 Section 129 of the Act provides that a credit provider may not commence any legal proceedings to enforce a credit agreement unless it has first provided a notice to the consumer as contemplated in paragraph (a) of that section or section 86 (10), as the case may be, and has met any further requirements set out in sections 130;

11.2 Section 130 (1) provides that the credit provider may approach the court to enforce a breached credit agreement only where, inter alia, at least ten business days have elapsed since the credit provider "delivered" a notice to the consumer as contemplated in section 129 and the consumer has not responded thereto;

3. The term "delivered" is not defined in the Act and the definition contained in the regulations made in terms thereof cannot be of assistance in this regard as it is clearly stated in the regulations that the definitions therein are applicable for the purposes of the regulations only;

3. Recourse should therefore be had to section 65 of the Act, which deals with the consumer’s right to receive documents. This section sets out six methods by which a document may be delivered, of which ordinary mail is one. Although section 65 (2) does not include delivery by registered mail, registered mail is a more reliable means of postage and would therefore constitute effective delivery under the circumstances contemplated by the Act.

3. The express language of the legislature in section 65 (2), i.e that it considers dispatch of a notice in the manner chosen by the appellants as sufficient for purposes of section 129 (1) (a), means that the risk of non receipt is the consumer’s responsibility.

[12] In this matter it is common cause that the section 129 notice was dispatched by way of ordinary post to a domicilum chosen by the appellant and was in fact received at that address, albeit by his father. It does not appear from the record whether or not the time period prescribed in terms of section 130 had in fact lapsed before summons was issued. This point was however not taken by the appellant and one can only assume that he would have relied on it if it was in fact available. Under these circumstances the court is constrained to accept that the aforesaid notice was in fact received at the chosen domicilium and that the prescribed time limits had been complied with by the time that the summons was issued. It is also not clear whether or not the appellant had chosen one of the methods for delivery prescribed by section 129 of the Act. Once again the court is constrained to accept that no such method was chosen by the appellant. The fact that the aforesaid notice was not brought to his attention by his father cannot assist the appellant. While there may previously have been conflicting pronouncements on this issue, the judgment in the Rossouw matter (supra) has now put it beyond doubt that the risk of non receipt of the section 129 notice lies with the credit receiver. Under these circumstances and applying the aforementioned legal principles enunciated in the Rossouw matter, I am of the view that the Respondent duly complied with the prescripts of sections 129 and 130 of the Act.

Exercise of discretion in terms of s. 85

[13] The appellant’s contention in this regard is that the court erred in finding that it has failed to place sufficient facts before it to enable the court to exercise its discretion in the appellant’s favour in terms of section 85 of the Act.

[14] In his supplementary affidavit the appellant alleged insufficient knowledge of the provisions of the Act and his rights in terms thereof, explained how he intended to service the arrear debts and made available information regarding his income and expenditure, outstanding debts, assets and included a report which detailed the findings and recommendations of a debt counsellor. In deciding whether or not to exercise his discretion in favour of the defendant in this regard Jansen J adopted the following approach:

14.1 He found that there would be no purpose to refer the matter to a debt counsellor as the defendant’s financial situation had already been assessed by a debt counsellor in terms of section 79 of the Act, and the latter had declared the defendant to be over-indebted. The debt counsellor has indeed restructured defendant’s monthly payments but made no provision for the repayment of interest which would form a substantial part of the repayment to the plaintiff;

14.2 The plaintiff’s over-indebtedness was largely due to the credit agreement with the respondent. If the appellant did not have that indebtedness it appeared that he would have been able to meet his monthly financial commitments;

3. It appeared also that the appellant was not dependent upon the property in question for his accommodation because at one stage he attempted to rent out the property to improve his financial position;

3. The defendant had stated that even with his anticipated increased income he would still be over-indebted and that it would take some time for him to get his debts up to date. His employment with his new employer, the Nelson Mandela Metropolitan Municipality was only for a period of six months. He did not state what his prospects would be after this period.

For these reasons he found that, on the facts before him, he could not exercise his discretion in favor of the appellant in terms of section 85 of the Act.

[16] Section 85 reads as follows:

“85     Court may declare and relieve over-indebtedness

 Despite any provision of law or agreement to the contrary, in any court proceedings in which a credit agreement is being considered, if it is alleged that the consumer under a credit agreement is over-indebted, the court may-

(a)     refer the matter directly to a debt counsellor with a request that the debt counsellor evaluate the consumer's circumstances and make a recommendation to the court in terms of section 86 (7); or

(b)     declare that the consumer is over-indebted, as determined in accordance with this Part, and make any order contemplated in section 87 to relieve the consumer's over-indebtedness.

[17] In terms of Section 87 a magistrate court may, inter alia, make an order declaring the credit agreement to be reckless or re-arranging the consumer's obligations in any manner contemplated in section 86 (7) (c) (ii), or both.

[18] The fact that the legislature did not enumerate factors or circumstances which should be considered by the court when called upon to exercise its discretion in terms of that section must necessarily mean that the court must exercise a judicial discretion with due regard to all the relevant facts placed before it, including the purpose of the Act as detailed in section 3.

[19] In this regard it is instructive that the orders contemplated in section 87 of the Act should be made

"… having regard to the proposal and information before it and the consumer's financial means, prospects and obligations" (my underlining).

The consumer's prospects and future ability to satisfy its obligations in terms of the credit agreement therefore remains an important consideration, particularly in a case where there is no question of the reckless granting of credit.

[20] In support of her submission that the court a quo did not give due consideration to the purpose and spirit of the Act when considering whether or not to grant relief in terms of sections 85 and 87, Ms Potgieter, who appeared on behalf of the appellant, has understandably relied on those portions of section 3 which tend to support her case. In my view, however, a proper reading of that section evinces a legislative intent to establish a far more equitable regime, albeit that the primary object of the Act undoubtedly remains the protection of consumers. This much was confirmed by Maya JA’s judgment in the Rossouw matter where she stated the following:

“As can be imagined and was properly acknowledged by counsel on behalf of the appellants, any number of inequities may result for credit providers from the interpretation for which the appellants contend. It needs to be considered that whilst the main object of the Act is to protect consumers, the interests of creditors must also be safeguarded and should not be overlooked. This is evidenced by s 3(d) which provides that equity in the credit market and industry – which the Act significantly acknowledges must be competitive, efficient and sustainable – entails, inter alia, balancing the respective rights and responsibilities of credit providers and consumers.

[21] It is trite law that an appeal court should be reluctant to interfere with a judicial discretion exercised by the court a quo. An appeal court cannot substitute its own decision merely because it would have come to a different conclusion. The court would only interfere on the basis that the judge has not exercised a judicial discretion. See in this regard R v Zackey 1945 AD 505. See also Ontvanger Van Inkomste Lebowa en n ander v De Meyer NO 1993 (4) SA 13 (A) at 28 B-D, See also Ex parte Neethling and others 1951 (4) SA 331 at 335B-G.

[22] In the event I am of the view that on a conspectus of all the facts in this matter this court would not have come to any different conclusion. I am in respectful agreement with Jansen J's finding that it would not have made any sense to remit the matter to the debt counsellor for further consideration. The debt counsellor had already restructured the appellant's debts but failed to make provision for the payment of interest, which formed a substantial part of the payment to the respondent. The impact of the addition of that further liability on the appellant's restructured financial position was patently apparent and did not require consideration or confirmation by a debt counsellor.

[23] Similarly it was abundantly clear that the appellant's over -indebtedness was largely due to the credit agreement with the respondent and his ability to satisfy all his responsible financial obligations in the light of the fact that he had secured employment for a period of six months only, was ,to say the least, suspect. In such circumstances, unless the credit agreement was reckless (which in this case it was not) the learned judge was fully justified in adopting an approach similar to that adopted by Erasmus J in Firstrand Bank v Olivier 2009 (3) SA 353 (SECLD). In that case Erasmus J, having considered a substantially similar factual scenario, said the following at page 362E-F:

“Should he retain the property the defendant, on his own figures, will be hard pressed to pay the monthly installments, let alone the R500 per month which he tenders on the arrears. Inevitably, any future shortfall of income in relation to expenses will be at the expense of his payments to the plaintiff, his major creditor, as happened in the past. With the bond obligation taken out of the question, it seems that the defendant will not be over-indebted. And if he is, he can always apply to a debt counselor in terms of s 86”

[24] Ms Potgieter has also submitted that the fact that the appellant was unaware of the contents of the section 129 letter and therefore not properly advised of his right to go for debt counselling in terms of the Act, is also a factor that should have been taken into account in the section 85 application. I am not entirely convinced that the appellant was totally oblivious of his right to go for debt counselling. In his opposing affidavit he stated the following:

“At this juncture I wish to advise that, as I wasn’t’ able to pay for debt counseling service, I continued to attempt to resolve the problem myself. I continued to explain to the applicant that I was not in a position to raise the arrears but that I wanted assistance so that I could save my home and the deal. I even considered renting my home out and living with my extended family in their servant’s quarters”

He also stated the following in an email to the respondent on 19 February 2009:

"Hoping that this matter can be resolved without costs of a debt councilor (sic)"

In the event, when he was called upon to exercise his discretion in terms of section 85, Jansen J had all the relevant information before him, including the report of the debt counsellor. It is difficult to imagine how the appellant's previous ignorance in this regard could have impacted on the exercise of his discretion.

[25] I am unable to find any evidence of misdirection on the part of the learned judge which would indicate that he did not exercise his judicial discretion properly. I am in respectful agreement with the learned judge that on the basis of facts placed before him, and which he had meticulously considered, a proper case had not been made out for exercise of the discretion in terms of section 85 in favour of the appellant.

Further grounds relied on by appellant

[26] Ms Potgieter argued also that the court a quo had erred in not distinguishing the facts of First Rand Bank LTD v Olivier 2009 (supra) from those in this matter. In this regard I agree with the submission made by Mr Scott, who appeared on behalf of the respondent, that the learned judge had relied on the aforesaid decision only to the extent that Erasmus J had in that matter, under substantially similar circumstances, found that should the defendant be allowed to retain the property he would be hard pressed on his own figures to pay the monthly installments, and if the bond obligation is taken out of the equation, the defendant would not be over-indebted. I am unable to find any reason why the learned judge's stated reliance on that authority was misplaced.

[27] Regarding Ms Potgieter’s contention that the learned judge in the court a quo had erred in applying legal principles set out in the decision of Standard Bank of South Africa Ltd v Panayiotts 2009 (3) SA 363 (W), I am also of the view that there is no merit in this argument. It does not appear from his judgment that he placed any reliance on this judgment. It seems to me clear that he had merely stated that he had been referred to it by counsel.

[28] In the result I am of the view that the appeal should fail. The appeal is therefore dismissed with costs.

______________________

J. E. SMITH

JUDGE OF THE HIGH COURT

I concur.

Roberson J

_______________________

J. M. ROBERSON

JUDGE OF THE HIGH COURT

I concur.

Zilwa AJ

____________________________

P. H. S. ZILWA

ACTING JUDGE OF THE HIGH COURT

Appearances

Counsel for the Appellant : Advocate S. Potgieter

Attorney for the Appellant : Netteltons Attorneys

118A High Street

Grahamstown

Ref: Mr. Netteltons/ Sam

Counsel for the Respondent : Advocate P. W. A Scott

Attorneys for the Respondent : Whitesides Attorneys

53 African Street

Grahamstown

6140

Ref: Mr. Nunn

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